Australia Tax: Australia rules out changing 40% resource super profit tax rate
"When it comes to the headline rate of taxation, the same as the petroleum resources tax is 40%, we think that is a fair level of taxation for the Australian mining industry," Ferguson said on local television Sunday. He added there would be "no movement at all" on the rate of the tax.
But he reiterated that the government was open to consultation with the mining and oil and gas industries, which have reacted angrily to the proposed new tax. The government announced the resources super profits tax (RSPT) on May 2, and plans to implement the new regime from July 1, 2012.
"What we are saying is that the headline tax rate is correct," Ferguson told the "Meet the Press" television program, according to a transcript. "But there is room for compromise, and I've said on a number of occasions, with respect to how you apply the proposed tax regime," he added.
"Let's be clear -- the government said from day one there is a process of consultation," Ferguson said. "I have urged the companies to go and open their books, both big and small, because there are technical issues to resolve."
The RSPT would be levied on companies' profits when they exceed the long-term bond rate, about 5-6%, instead of the existing system under which Australian state governments take a royalty on production. The resources super profits tax (RSPT) will apply to all mining and petroleum projects, except new offshore oil and gas developments, which are covered under petroleum resource rent tax.
The new tax is seen as a particular burden for Australia's burgeoning coal seam gas-based LNG industry in Queensland. Previously, coal seam gas producers have paid a 10% royalty on production at the wellhead.
Don Voelte, head of Australia's largest listed oil and gas company Woodside Petroleum, on Friday highlighted the differences between Petroleum Resource Rent Tax (PRRT) and the proposed resources super profits tax (RSPT). The new tax is retrospective; had a LIBOR hurdle rate, when the cost of capital for the industry was 9-9.5%; and had a risk-sharing mechanism which proposed the government would fund 40% of the cost of projects even if they failed, he said. In comparison, Petroleum Resource Rent Tax (PRRT) is a true profits tax, levied at 40% after investment has been recouped, and paid in addition to the current 30% company tax, Voelte added.
In his interview, Ferguson took a softer line on the point at which the new tax might become payable. "I am not prepared to suggest that there is any movement [on the hurdle rate] but we will wait the outcome of those discussions [with the government's consultation committee]. I say there are different issues from different companies' point of view, different industries' point of view. We will sit down and assess the outcome of that process of consultation," he said.
He also appeared to be open on the possibility of a tax which was differentiated across various resources industries. "I think it is a question of how you apply the tax in the technical details going to taxing points etcetera. It determines the nature of the outcome from sector to sector," he said.
"There will be a profit-based tax in Australia, the headline rate is going to be 40%, but there are refinements that can be made to make the tax appropriate and balanced from a mining industry point of view whilst getting an appropriate outcome from the Australian community point of view," Ferguson added.
The minister's comments were backed by federal Treasurer Wayne Swan. "We published the framework for the tax; we are sticking within that framework," he told Australian Broadcasting Corporation radio early Monday.
"We said we are genuine about consultation on this tax, and we are consulting the industry... But the one thing we won't do is move away from this fundamental tax that will deliver fair value to the Australian people for their resources which they own 100%," Swan added.
TAX NEWS - may 2010
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